Exam 10: Taxation of Corporations

Maui Corporation makes two distributions during the current tax year: the first for $20,000 on February 1 and the second for $30,000 on August 1. Before consideration of the distributions, the corporation has $18,000 in current earnings and profits and $21,000 of accumulated earnings and profits. How much of the first distribution is taxable to the shareholders as a dividend?

An exempt organization normally operates as a:

M&E Corporation has two shareholders, Marco and Edward. M&E Corporation has current E&P of $50,000 and a deficit in accumulated E&P of $40,000. M&E Corporation is in the 25% marginal tax bracket. M&E Corporation distributes investment land to these shareholders. The land distributed to Marco has a FMV of $30,000 and a basis to M&E Corporation of $24,000. The land distributed to Edward has a FMV of $30,000 and a basis to M&E Corporation of $26,000. Marco's basis for his stock is $2,000. Edward's basis for his stock is $1,000. How much gain, if any, does M&E Corporation recognize on the distribution of this land to its shareholders?

Soho is a personal service corporation that has $1,200,000 of gross revenue and $1,021,000 of deductible expenses? What is its income tax liability for 2018?

A clothing manufacturing corporation donates last year's inventory to the Red Cross for use in its disaster relief efforts. The clothes have a fair market value of $200,000 and a basis to the corporation of $75,000. What is its charitable contribution deduction?

What is the purpose of earnings and profits?

A corporation owns 90 percent of the voting power of a second corporation but only 70 percent of its total stock value. The corporations are:

Ponoco Corporation, which has current earnings and profits (CE&P) of $10,000 and accumulated earnings and profits (AE&P) of $30,000, makes a $41,000 distribution to its sole shareholder, Greg, at the end of the current year. Greg has a basis in his Ponoco stock of $2,000. What is the amount of taxable income Greg must report from the Ponoco distribution?

Coho is a corporation that has $1,100,000 of gross revenue and $1,021,000 of deductible expenses? What is its income tax liability for 2018?

In 2017, a corporation's deduction for qualified U.S. production activities was 9% of qualified production activities income up to a maximum of 50% of applicable wages paid during the year.

A corporation's general business credit cannot completely eliminate its income tax liability.